Page 40 - GIADA-Mar 2018-web

THE CARLAWYER ©

Continued from page 36 CASE OF THE MONTH The court denied Tower Loan’s motion
The CFPB’s third RFI seeks information to compel arbitration. The court first
to assess the overall efficiency and Some lessons seem to require learning addressed Tower Loan’s argument that
effectiveness of its processes related to over and over again. The lesson this the Arbitration Agreement and the
the enforcement of federal consumer month is: Don’t employ multiple Endorsement governed different issues
financial laws. Comments are due by arbitration agreements in a single and/or parties, and the dispute in this
April 13, 2018. transaction. Here’s what happened in a case was governed by the Arbitration
recent case. Agreement. The court disagreed, noting
The fourth RFI seeks information that both the Arbitration Agreement
to assess the overall efficiency and Chuck Willis filed an adversary and the Endorsement governed claims
effectiveness of the CFPB’s supervision proceeding in his Chapter 7 bankruptcy against Tower Loan arising under the
program. Comments are due by May 21, case against Tower Loan of Mississippi, loan agreement, including any insurance
2018. LLC. Willis alleged that Tower Loan purchased in connection with the loan.
violated the Truth in Lending Act and
Finally, the CFPB’s fifth RFI on external Regulation Z by providing misleading and The court went on to address the impact
engagements seeks information on ways incorrect disclosures in his installment of the inconsistent and conflicting
to engage the public and receive feedback loan agreement with regard to, among provisions and determined that, under
on the agency’s work. Comment other things, the credit insurance he Tenth Circuit precedent, the terms of
deadlines for the fifth RFI have not yet bought in connection with the loan. the arbitration agreements were not
been published. “sufficiently definite” as required by Hiram
Tower Loan moved to compel arbitration Mississippi law, which governed the
No ACE up Their Sleeves? On January under an arbitration clause in the loan loan agreement. Therefore, the court
25, the Office of the Associate Attorney agreement. The agreement contained concluded that there was no “meeting of
General at the U.S. Department of Justice an arbitration disclaimer that said: “By the minds” as to how to arbitrate claims Andy Turner, Mgr.
issued a memorandum to its litigators signing below and obtaining this loan, under the arbitration agreements and,
announcing its policy regarding the borrower agrees to the Arbitration thus, no agreement to arbitrate.
use of agencies’ guidance documents in Agreement on the additional pages of this
affirmative civil enforcement (“ACE”) agreement. You should read it carefully Is it time to review your paperwork again? Melissa Johnson, Mgr.
cases. The AAG states: “Guidance before you sign below. Important
documents cannot create binding provisions, including our privacy policy, In re Willis (Willis v. Tower Loan of Hiram
requirements that do not already exist are contained on additional pages and Mississippi, LLC), 2017 Bankr. LEXIS
by statute or regulation. Accordingly, incorporated herein.” The reverse side 4243 (Bankr. S.D. Miss. December 12, Eric Forrister, Mgr.
effective immediately for ACE cases, of the loan agreement contained the 2017)
the [DOJ] may not use its enforcement Arbitration Agreement.
authority to effectively convert agency So, there’s this month’s roundup! Stay
guidance documents into binding rules. At the hearing on the motion, the legal, and we’ll see you next month. n
Likewise, [DOJ] litigators may not use parties presented to the court, for the
noncompliance with guidance documents first time, an Endorsement to Require Tom (thudson@hudco.com) is Of Counsel
as a basis for proving violations of Binding Arbitration, which represented and Nikki (nmunro@hudco.com) is a
applicable law in ACE cases. The [DOJ] the “additional pages” referenced in the Partner in the law firm of Hudson Cook,
may continue to use agency guidance arbitration disclaimer. Willis argued that LLP. Tom has written several books and is
documents for proper purposes in such because the Arbitration Agreement and the publisher of Spot Delivery®, a monthly
cases. For instance, some guidance the Endorsement contained different and legal newsletter for auto dealers. He is
documents simply explain or paraphrase conflicting terms regarding the number the CEO of CounselorLibrary.com, LLC
legal mandates from existing statutes of arbitrators, how the arbitrators will be and the Editor in Chief of CARLAW®, a
or regulations, and the [DOJ] may use selected, the notice required to arbitrate, monthly report of legal developments for
evidence that a party read such a guidance the location of the arbitration, who pays the auto finance and leasing industry.
document to help prove that the party had the cost of arbitration, who would be Nikki is a contributing author to the F&I
the requisite knowledge of the mandate. entitled to attorneys’ fees and when, and Legal Desk Book and frequently writes for
However, the [DOJ] should not treat a when arbitration proceedings need not Spot Delivery®. For information, visit www.
party’s noncompliance with an agency be initiated, there was no meeting of the counselorlibrary.com. © CounselorLibrary.
guidance document as presumptively minds with respect to arbitration. com 2018, all rights reserved. Single
or conclusively establishing that the publication rights only, to the Association.
party violated the applicable statute or (3/18). HC/4843-0068-2590v1.
regulation.”

38 | GIADA Independent Auto Dealer MARCH 2018